UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| þ | | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | For the fiscal year December 31, 2004. |
| o | | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | For the transition period from to . |
Commission file number 0-19969
ARKANSAS BEST CORPORATION
(Exact name of registrant as specified in its charter)
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| Delaware | | 71-0673405 |
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(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
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| 3801 Old Greenwood Road, Fort Smith, Arkansas | | 72903 |
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| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code 479-785-6000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
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| Title of each class | | Name of each exchange
on which registered |
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| Common Stock, $.01 Par Value | | Nasdaq Stock Market/NMS |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-Ko
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yesþ Noo
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 22, 2005, was $905,595,807.
The number of shares of Common Stock, $.01 par value, outstanding as of February 22, 2005, was 25,291,970.
Documents incorporated by reference into the Form 10-K:
| 1) | The following sections of the 2004 Annual Report to Stockholders: |
| | - | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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| | - | Selected Financial Data |
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| | - | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| | - | Quantitative and Qualitative Disclosures About Market Risk |
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| | - | Financial Statements and Supplementary Data |
| |
| | - | Controls and Procedures |
| 2) | Proxy Statement for the Annual Stockholders’ meeting to be held April 20, 2005. INTERNET:www.arkbest.com |
ARKANSAS BEST CORPORATION
FORM 10-K
TABLE OF CONTENTS
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PART I
Except for historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Arkansas Best Corporation’s actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1, “Business.”
(a) General Development of Business
Corporate Profile
Arkansas Best Corporation (the “Company”) is a holding company engaged through its subsidiaries primarily in motor carrier transportation operations and intermodal transportation operations. Principal subsidiaries are ABF Freight System, Inc. (“ABF”); Clipper Exxpress Company (“Clipper”); and FleetNet America, Inc. (“FleetNet”).
Historical Background
The Company was publicly owned from 1966 until 1988, when it was acquired in a leveraged buyout by a corporation organized by Kelso & Company, L.P. (“Kelso”).
In 1992, the Company completed a public offering of Common Stock, par value $.01 (the “Common Stock”). The Company also repurchased substantially all of the remaining shares of Common Stock beneficially owned by Kelso, thus ending Kelso’s investment in the Company.
In 1993, the Company completed a public offering of 1,495,000 shares of $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock (“Preferred Stock”). The Company’s Preferred Stock was traded on The Nasdaq National Market (“Nasdaq”) under the symbol “ABFSP.”
On July 10, 2000, the Company purchased 105,000 shares of its Preferred Stock at $37.375 per share, for a total cost of $3.9 million. All of the shares purchased were retired. As of December 31, 2000, the Company had outstanding 1,390,000 shares of Preferred Stock.
On August 13, 2001, the Company announced the call for redemption of its Preferred Stock. As of August 10, 2001, 1,390,000 shares of Preferred Stock were outstanding. At the end of the extended redemption period on September 14, 2001, 1,382,650 shares of the Preferred Stock were converted to 3,511,439 shares of Common Stock. A total of 7,350 shares of Preferred Stock were redeemed at the redemption price of $50.58 per share. The Company paid $0.4 million to the holders of these shares in redemption of their Preferred Stock. The Company delisted its Preferred Stock trading on Nasdaq under the symbol “ABFSP” on September 12, 2001, eliminating the Company’s annual dividend requirement.
In August 1995, pursuant to a tender offer, a wholly owned subsidiary of the Company purchased the outstanding shares of common stock of WorldWay Corporation (“WorldWay”), at a price of $11 per share (the “Acquisition”). WorldWay was a publicly held company engaged through its subsidiaries in motor carrier operations. The total purchase price of WorldWay amounted to approximately $76.0 million.
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| ITEM 1. | BUSINESS — continued |
During the first half of 1999, the Company acquired 2,457,000 shares of Treadco common stock for $23.7 million via a cash tender offer pursuant to a definitive merger agreement. As a result of the transaction, Treadco became a wholly owned subsidiary of the Company. On September 13, 2000, Treadco entered into a joint venture agreement with The Goodyear Tire & Rubber Company (“Goodyear”) to contribute its business to a new limited liability company called Wingfoot Commercial Tire Systems, LLC (“Wingfoot”). The transaction closed on October 31, 2000.
On April 28, 2003, the Company sold its 19.0% ownership interest in Wingfoot to Goodyear for a cash price of $71.3 million (see Note E).
On August 1, 2001, the Company sold the stock of G.I. Trucking Company (“G.I. Trucking”) for $40.5 million in cash to a company formed by the senior executives of G.I. Trucking and Estes Express Lines (“Estes”).
On December 31, 2003, Clipper closed the sale of all customer and vendor lists related to Clipper’s less-than-truckload (“LTL”) freight business to Hercules Forwarding Inc. of Vernon, California for $2.7 million in cash (see Note D). With this sale, Clipper exited the LTL business.
(b) Financial Information about Industry Segments
The response to this portion of Item 1 is included in “Note M – Operating Segment Data” of the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, and is incorporated herein by reference under Item 15.
(c) Narrative Description of Business
General
During the periods being reported on, the Company operated in two reportable operating segments: (1) ABF and (2) Clipper. Note M to the Consolidated Financial Statements contains additional information regarding the Company’s operating segments for the year ended December 31, 2004, and is incorporated herein by reference under Item 15.
Employees
At December 31, 2004, the Company and its subsidiaries had a total of 12,174 active employees of which approximately 74.0% are members of labor unions.
Motor Carrier Operations
Less-Than-Truckload (“LTL”) Motor Carrier Operations
General
The Company’s LTL motor carrier operations are conducted through ABF, ABF Freight System (B.C.), Ltd. (“ABF-BC”), ABF Freight System Canada, Ltd. (“ABF-Canada”), ABF Cartage, Inc. (“Cartage”), Land-Marine Cargo, Inc. (“Land-Marine”) and FreightValue, Inc. (“FreightValue”) (collectively “ABF”).
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| ITEM 1. | BUSINESS — continued |
LTL carriers offer services to shippers, transporting a wide variety of large and small shipments to geographically dispersed destinations. LTL carriers pick up shipments throughout the vicinity of a local terminal and consolidate them at the terminal. Shipments are consolidated by destination for transportation by intercity units to their destination cities or to distribution centers. At distribution centers, shipments from various locations can be reconsolidated for other distribution centers or, more typically, local terminals. Once delivered to a local terminal, a shipment is delivered to the customer by local trucks operating from the terminal. In some cases, when one large shipment or a sufficient number of different shipments at one origin terminal are going to a common destination, they can be combined to make a full trailer load. A trailer is then dispatched to that destination without rehandling.
Competition, Pricing and Industry Factors
The trucking industry is highly competitive. The Company’s LTL motor carrier subsidiaries actively compete for freight business with other national, regional and local motor carriers and, to a lesser extent, with private carriage, freight forwarders, railroads and airlines. Competition is based primarily on personal relationships, price and service. In general, most of the principal motor carriers use similar tariffs to rate less-than-truckload shipments. Competition for freight revenue, however, has resulted in discounting which effectively reduces prices paid by shippers. In an effort to maintain and improve its market share, the Company’s LTL motor carrier subsidiaries offer and negotiate various discounts.
The trucking industry, including the Company’s LTL motor carrier subsidiaries, is directly affected by the state of the overall U.S. economy. The trucking industry faces rising costs including government regulations on safety, maintenance and fuel economy. The trucking industry is dependent upon the availability of adequate fuel supplies. The Company has not experienced a lack of available fuel but could be adversely impacted if a fuel shortage were to develop. In addition, seasonal fluctuations also affect tonnage to be transported. Freight shipments, operating costs and earnings also are affected adversely by inclement weather conditions.
On July 8, 2003, Yellow Corporation announced that it had entered into a definitive agreement to acquire Roadway Corporation. The acquisition was completed in December 2003. Yellow Corporation and Roadway Corporation are significant competitors of ABF.
Effective January 4, 2004, ABF adopted the new Hours of Service rules as prescribed by the U.S. Department of Transportation. The new rules reduce the number of hours a driver can be on duty from 15 to 14 but increase the number of driving hours, during that tour of duty, from 10 to 11. In addition, the new rules require the rest period between driving tours to be 10 hours as opposed to 8. The new rules also provide for a “restart” provision, which states that a driver can be on duty for 70 hours in 8 days, but if the driver has 34 consecutive hours off duty, for any reason, he “restarts” at zero hours. The operational impact on ABF’s over-the-road line-haul relay network has been modest and includes a small decline in driver and equipment utilization, offset by the opportunity to further improve transit times. The new rules have limited impact on LTL carriers, such as ABF, whose pickup, linehaul and delivery operations typically are performed by different drivers. Impacts on the truckload industry have been more significant, including a decline in driver utilization and flexibility and an exascerbation of a nationwide driver shortage. As a result, truckload carriers have increased driver pay, raised customer prices and increased charges for stop-off and detention services, making LTL carriers more competitive on many larger shipments. On September 30, 2004, the U.S. Congress voted to extend the current Hours of Service Regulations until no later than September 30, 2005 after a mid-July 2004 ruling by the U.S. Court of Appeals for the District of Columbia that vacated those rules. The Company believes that the existing rules have had a positive impact on highway safety and the welfare of its employees.
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| ITEM 1. | BUSINESS — continued |
Insurance, Safety and Security
Generally, claims exposure in the motor carrier industry consists of cargo loss and damage, third-party casualty and workers’ compensation. The Company’s motor carrier subsidiaries are effectively self-insured for the first $500,000 of each cargo loss, $1,000,000 of each workers’ compensation loss and $1,000,000 of each third-party casualty loss. The Company maintains insurance which it believes is adequate to cover losses in excess of such self-insured amounts. However, the Company has experienced situations where excess insurance carriers have become insolvent (see Note R). The Company pays premiums to state guaranty funds in states where it has workers’ compensation self-insurance authority. In some of these self-insured states, depending on each state’s rules, the guaranty funds will pay excess claims if the insurer cannot due to insolvency. However, there can be no certainty of the solvency of individual state guaranty funds (see Note R). The Company has been able to obtain what it believes to be adequate coverage for 2005 and is not aware of problems in the foreseeable future which would significantly impair its ability to obtain adequate coverage at market rates for its motor carrier operations.
Since 2001, ABF has been subject to cargo security and transportation regulations issued by the Transportation Security Administration. Since 2002, ABF has been subject to regulations issued by the Department of Homeland Security. ABF is not able to accurately predict how past or future events will affect government regulations and the transportation industry. However, ABF believes that any additional security measures that may be required by future regulations could result in additional costs.
ABF Freight System, Inc.
Headquartered in Fort Smith, Arkansas, ABF is the largest subsidiary of the Company. ABF accounted for 92.4% of the Company’s consolidated revenues for 2004. ABF is one of North America’s largest LTL motor carriers, based on revenues for 2004 as reported to the U.S. Department of Transportation (“D.O.T.”). ABF provides direct service to over 97.0% of the cities in the United States having a population of 25,000 or more. ABF provides interstate and intrastate direct service to more than 47,000 communities through 287 service centers in all 50 states, Canada and Puerto Rico. Through relationships with trucking companies in Mexico, ABF provides motor carrier services to customers in that country as well. ABF has been in continuous service since 1923. ABF was incorporated in Delaware in 1982 and is the successor to Arkansas Motor Freight, a business originally organized in 1935. Arkansas Motor Freight was the successor to a business originally organized in 1923.
ABF offers national, interregional and regional transportation of general commodities through standard, expedited and guaranteed LTL services. General commodities include all freight except hazardous waste, dangerous explosives, commodities of exceptionally high value and commodities in bulk. ABF’s general commodities shipments differ from shipments of bulk raw materials, which are commonly transported by railroad, pipeline and water carrier.
General commodities transported by ABF include, among other things, food, textiles, apparel, furniture, appliances, chemicals, non-bulk petroleum products, rubber, plastics, metal and metal products, wood, glass, automotive parts, machinery and miscellaneous manufactured products. During the year ended December 31, 2004, no single customer accounted for more than 3.0% of ABF’s revenues, and the ten largest customers accounted for approximately 10.0% of ABF’s revenues.
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| ITEM 1. | BUSINESS — continued |
Employees
At December 31, 2004, ABF had a total of 11,674 active employees. Employee compensation and related costs are the largest components of ABF’s operating expenses. In 2004, such costs amounted to 61.0% of ABF’s revenues. Approximately 77.0% of ABF’s employees are covered under a collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”). On March 28, 2003, the IBT announced the ratification of its National Master Freight Agreement with the Motor Freight Carriers Association (“MFCA”) by its membership. ABF is a member of the MFCA. The agreement has a five-year term and was effective April 1, 2003. The agreement provides for annual contractual wage and benefit increases of approximately 3.2% — 3.4%. Under the terms of the National Agreement, ABF is required to contribute to various multiemployer pension plans maintained for the benefit of its employees who are members of the IBT. Amendments to the Employee Retirement Income Security Act of 1974 (“ERISA”), pursuant to the Multiemployer Pension Plan Amendments Act of 1980 (the “MPPA Act”), substantially expanded the potential liabilities of employers who participate in such plans. Under ERISA, as amended by the MPPA Act, an employer who contributes to a multiemployer pension plan and the members of such employer’s controlled group are jointly and severally liable for their proportionate share of the plan’s unfunded liabilities in the event the employer ceases to have an obligation to contribute to the plan or substantially reduces its contributions to the plan (i.e., in the event of plan termination or withdrawal by the Company from the multiemployer plans). Although the Company has no current information regarding its potential liability under ERISA, in the event it wholly or partially ceases to have an obligation to contribute or substantially reduces its contributions to the multiemployer plans to which it currently contributes, management believes that such liability would be material. The Company has no intention of ceasing to contribute or of substantially reducing its contributions to such multiemployer plans (see Note L for more specific disclosures regarding the Central States Pension Fund).
Three of the largest LTL carriers are unionized and generally pay comparable amounts for wages and benefits. Union companies typically have somewhat higher wage costs and significantly higher fringe benefit costs than nonunion companies. Union companies also experience lower employee turnover and higher productivity compared to some nonunion firms. Due to its national reputation, its working conditions and its high pay scale, ABF has not historically experienced any significant long-term difficulty in attracting or retaining qualified employees, although short-term difficulties are encountered in certain situations, such as significant increases in business levels, as occurred in 2004.
Environmental and Other Government Regulations
The Company is subject to federal, state and local environmental laws and regulations relating to, among other things, contingency planning for spills of petroleum products and its disposal of waste oil. In addition, the Company is subject to significant regulations dealing with underground fuel storage tanks. The Company’s subsidiaries, or lessees, store fuel for use in tractors and trucks in 77 underground tanks located in 24 states. Maintenance of such tanks is regulated at the federal and, in some cases, state levels. The Company believes that it is in substantial compliance with all such regulations. The Company’s underground storage tanks are required to have leak detection systems. The Company is not aware of any leaks from such tanks that could reasonably be expected to have a material adverse effect on the Company.
The Company has received notices from the Environmental Protection Agency (“EPA”) and others that it has been identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response Compensation and Liability Act, or other federal or state environmental statutes, at several hazardous waste sites. After investigating the Company’s or its subsidiaries’ involvement in waste disposal or waste generation at such sites, the Company has either agreed to de minimis settlements (aggregating approximately $109,000 over the last 10 years primarily at seven sites) or believes its obligations, other than those specifically accrued for, with respect to such sites, would involve immaterial monetary liability, although there can be no assurances in this regard.
As of December 31, 2004 and December 31, 2003, the Company had accrued approximately $3.3 million and $2.9 million, respectively, to provide for environmental-related liabilities. The Company’s environmental accrual is based on management’s best estimate of the liability. The Company’s estimate is founded on management’s experience in dealing with similar environmental matters and on actual testing performed at some sites. Management believes that the accrual is adequate to cover environmental liabilities based on the present environmental regulations. It is anticipated that the resolution of the Company’s environmental matters could take place over several years. Accruals for environmental liability are included in the balance sheet as accrued expenses and in other liabilities.
Intermodal Operations
General
The Company’s intermodal transportation operations are conducted through Clipper. Headquartered in Woodridge, Illinois, Clipper offers domestic intermodal freight services, utilizing a variety of transportation modes, including rail and over-the-road. Clipper’s revenues accounted for 5.6% of consolidated revenues for 2004. During the year ended December 31, 2004, Clipper’s largest customer accounted for approximately 16.4% of its revenues.
On December 31, 2003, Clipper closed the sale of all customer and vendor lists related to its LTL freight business to Hercules Forwarding Inc. of Vernon, California for $2.7 million in cash. With this sale, Clipper exited the LTL business (see Note D). Clipper’s LTL operation accounted for approximately 30.0% of its 2003 revenues.
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| ITEM 1. | BUSINESS — continued |
Clipper provides a variety of transportation services such as intermodal and truck brokerage, consolidation, transloading, repacking, and other ancillary services. As an intermodal marketing operation, Clipper arranges for loads to be picked up by a drayage company, tenders them to a railroad, and then arranges for a drayage company to deliver the shipment on the other end of the move. Clipper’s role in this process is to select the most cost-effective means to provide quality service and to expedite movement of the loads at various interface points to ensure seamless door-to-door transportation.
Clipper also provides high quality, temperature-controlled intermodal transportation service to fruit and produce brokers, growers, shippers and receivers and supermarket chains, primarily from the West to the Midwest, Canada, and the eastern United States. As of December 31, 2004, Clipper owned 595 temperature-controlled trailers that it deployed in the seasonal fruit and vegetable markets. These markets are carefully selected in order to take advantage of various seasonally high rates, which peak at different times of the year. By focusing on the spot market for produce transport, Clipper is able to generate, on average, a higher revenue per load compared to standard temperature-controlled carriers that pursue more stable year-round temperature-controlled freight. Clipper services also include transportation of non-produce loads requiring protective services and leasing trailers during non-peak produce seasons.
Competition, Pricing and Industry Factors
Clipper operates in highly competitive environments. Competition is based on the most consistent transit times, freight rates, damage-free shipments and on-time delivery of freight. Clipper competes with other intermodal transportation operations, freight forwarders and railroads. Intermodal transportation operations are akin to motor carrier operations in terms of market conditions, with revenues being weaker in the first quarter and stronger during the months of June through October. Freight shipments, operating costs and earnings are also affected by the state of the overall U.S. economy and inclement weather. Clipper’s margins are impacted by the amount of rail rebates it receives from rail service providers. The amount of rail rebates Clipper receives, is in part impacted by its rail volumes. The reliability of rail service is also a critical component of Clipper’s ability to provide service to its customers.
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| ITEM 1. | BUSINESS — continued |
(d) Financial Information About Geographic Areas
Classifications of operations or revenues by geographic location beyond the descriptions previously provided is impractical and is, therefore, not provided. The Company’s foreign operations are not significant.
(e) Available Information
The Company files its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, proxy and information statements and other information electronically with the Securities and Exchange Commission (“SEC”). All reports and financial information can be obtained, free of charge, through the Company’s Web site located at www.arkbest.com or through the SEC Web site located at www.sec.gov as soon as reasonably practical after such material is electronically filed with the SEC.
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The Company owns its executive office building in Fort Smith, Arkansas, which contains approximately 189,000 square feet.
ABF
ABF currently operates out of 287 terminal facilities of which it owns 73, leases 45 from an affiliate (Transport Realty, Inc., a consolidated Arkansas Best Corporation subsidiary) and leases the remainder from non-affiliates. ABF’s distribution centers are as follows:
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| | | No. of Doors | | Square Footage |
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| Owned: | | | | |
| Dayton, Ohio | | 330 | | 249,765 |
| Ellenwood, Georgia | | 226 | | 153,209 |
| South Chicago, Illinois | | 274 | | 152,990 |
| Carlisle, Pennsylvania | | 332 | | 188,868 |
| Dallas, Texas | | 194 | | 144,170 |
| Winston-Salem, North Carolina | | 150 | | 160,700 |
| Kansas City, Missouri | | 252 | | 161,740 |
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| Leased from affiliate, Transport Realty, Inc.: | | | | |
| North Little Rock, Arkansas | | 196 | | 148,712 |
| Albuquerque, New Mexico | | 85 | | 71,004 |
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| Leased from non-affiliate: | | | | |
| Salt Lake City, Utah | | 92 | | 44,400 |
Clipper
Clipper operates from three leased locations, which include Woodridge, Illinois; Fresno, California and San Diego, California.
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| ITEM 3. | LEGAL PROCEEDINGS |
Various legal actions, the majority of which arise in the normal course of business, are pending. None of these legal actions is expected to have a material adverse effect on the Company’s financial condition, cash flows or results of operations. The Company maintains insurance against certain risks arising out of the normal course of its business, subject to certain self-insured retention limits. The Company has accruals for certain legal and environmental exposures.
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| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of stockholders during the fourth quarter ended December 31, 2004.
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PART II
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| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
The information set forth under the caption “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, is incorporated by reference herein. The information set forth under the caption “Equity Compensation Plan Information” appearing in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be filed by the Company with the Securities and Exchange Commission (“Definitive Proxy Statement”) is incorporated by reference herein.
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| ITEM 6. | SELECTED FINANCIAL DATA |
The information set forth under the caption “Selected Financial Data” appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, is incorporated by reference herein.
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| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, is incorporated by reference herein.
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| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
“Quantitative and Qualitative Disclosures About Market Risk,” appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, is incorporated by reference herein.
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| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The report of the independent registered public accounting firm, consolidated financial statements and supplementary information, appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, are incorporated by reference herein.
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| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
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| ITEM 9A. | CONTROLS AND PROCEDURES |
As of the end of the period covered by this report, an evaluation was performed by the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2004. There have been no changes in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s assessment of internal control over financial reporting and the report of the independent registered public accounting firm, appearing in the registrant’s Annual Report to Stockholders for the year ended December 31, 2004, are incorporated by reference herein.
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| ITEM 9B. | OTHER INFORMATION
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None.
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PART III
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| ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
The sections entitled “Election of Directors,” “Directors of the Company,” “Board of Directors and Committees,” “Executive Officers of the Company” “General Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Definitive Proxy Statement set forth certain information with respect to the directors, the nominees for election as director and executive officers of the Company and are incorporated herein by reference.
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| ITEM 11. | EXECUTIVE COMPENSATION |
The sections entitled “Summary Compensation Table,” “Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End Options/SAR Values,” “Stock Option/SAR Grants,” “Compensation Committee Interlocks and Insider Participation,” “Retirement and Savings Plans,” “Employment Contracts and Termination of Employment and Change-in-Control Arrangements,” the paragraph concerning directors’ compensation in the section entitled “Board of Directors and Committees,” “Report on Executive Compensation by the Compensation Committee” and “Stock Performance Graph” in the Company’s Definitive Proxy Statement set forth certain information with respect to compensation of management of the Company and are incorporated herein by reference.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The sections entitled “Principal Stockholders and Management Ownership” and “Equity Compensation Plan Information” in the Company’s Definitive Proxy Statement set forth certain information with respect to the ownership of the Company’s voting securities and are incorporated herein by reference.
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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
The section entitled “Certain Transactions and Relationships” in the Company’s Definitive Proxy Statement sets forth certain information with respect to relations of and transactions by management of the Company and is incorporated herein by reference.
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| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The sections entitled “Principal Accountant Fees and Services” and “Policies and Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm” in the Company’s Definitive Proxy Statement set forth certain information with respect to principal accountant fees and services and is incorporated herein by reference.
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PART IV
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| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a)(1) Financial Statements
The following information appearing in the 2004 Annual Report to Stockholders is incorporated by reference in this Form 10-K Annual Report as Exhibit 13:
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Controls and Procedures
With the exception of the aforementioned information, the 2004 Annual Report to Stockholders is not deemed filed as part of this report. Schedules other than those listed are omitted for the reason that they are not required or are not applicable. The following additional financial data should be read in conjunction with the consolidated financial statements in such 2004 Annual Report to Stockholders.
(a)(2) Financial Statement Schedules
For the years ended December 31, 2004, 2003, and 2002.
Schedule II – Valuation and Qualifying Accounts and Reserves Page 16
(a)(3) Exhibits
The exhibits filed with this report are listed in the Exhibit Index, which is submitted as a separate section of this report.
(b) Exhibits
See Item 15(a)(3) above.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | | ARKANSAS BEST CORPORATION |
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| | By: | | /s/David E. Loeffler |
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| | | | David E. Loeffler |
| | | | Senior Vice President — Chief Financial |
| | | | Officer, Treasurer and Principal |
| | | | Accounting Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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| Signature | | Title | | Date |
| | | | | |
| /s/Robert A. Young III | | Chairman of the Board, Director, | | February 24, 2005 |
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| Robert A. Young III | | Chief Executive Officer and Principal Executive Officer | | |
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| /s/Robert A. Davidson | | Director, President and | | February 24, 2005 |
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| Robert A. Davidson | | Chief Operating Officer | | |
| | | | | |
| /s/David E. Loeffler | | Senior Vice President — Chief Financial Officer, | | February 24, 2005 |
| | | | | |
| David E. Loeffler | | Treasurer and Principal Accounting Officer | | |
| | | | | |
| /s/Frank Edelstein | | Lead Independent Director | | February 24, 2005 |
| | | | | |
| Frank Edelstein | | | | |
| | | | | |
| /s/John H. Morris | | Director | | February 24, 2005 |
| | | | | |
| John H. Morris | | | | |
| | | | | |
| /s/Alan J. Zakon | | Director | | February 24, 2005 |
| | | | | |
| Alan J. Zakon | | | | |
| | | | | |
| /s/William M. Legg | | Director | | February 24, 2005 |
| | | | | |
| William M. Legg | | | | |
| | | | | |
| /s/Fred A. Allardyce | | Director | | February 24, 2005 |
| | | | | |
| Fred A. Allardyce | | | | |
15
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ARKANSAS BEST CORPORATION
| | | | | | | | | | | | | | | | | | | | | |
| Column A | | Column B | | | Column C | | | Column D | | | Column E | | | Column F | |
| | | | | | | Additions | | | | | | | |
| | | Balance at | | | Charged to | | | Charged to | | | | | | | |
| | | beginning | | | costs and | | | other accounts | | | Deductions - | | | Balance at | |
| Description | | of period | | | expenses | | | describe | | | describe | | | end of period | |
| | | | | | | | | | | ($ thousands) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2004: | | | | | | | | | | | | | | | | | | | | |
| Deducted from asset accounts: | | | | | | | | | | | | | | | | | | | | |
| Allowance for doubtful accounts receivable and revenue adjustments | | $ | 3,558 | | | $ | 1,411 | | | $ | 2,149 | (A) | | $ | 2,693 | (B) | | $ | 4,425 | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2003: | | | | | | | | | | | | | | | | | | | | |
| Deducted from asset accounts: | | | | | | | | | | | | | | | | | | | | |
| Allowance for doubtful accounts receivable and revenue adjustments | | $ | 2,942 | | | $ | 1,556 | | | $ | 1,474 | (A) | | $ | 2,414 | (B) | | $ | 3,558 | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2002: | | | | | | | | | | | | | | | | | | | | |
| Deducted from asset accounts: | | | | | | | | | | | | | | | | | | | | |
| Allowance for doubtful accounts receivable and revenue adjustments | | $ | 3,483 | | | $ | 1,593 | | | $ | 958 | (A) | | $ | 3,092 | (B) | | $ | 2,942 | |
| |
Note A — Recoveries of amounts previously written off.
Note B — Uncollectible accounts written off.
16
FORM 10-K — ITEM 15(a)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
The following exhibits are filed with this report or are incorporated by reference to previously filed material.
| | | |
| Exhibit | | |
| No. | | |
| | | |
| 3.1* | | Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 under the Securities Act of 1933 filed with the Commission on March 17, 1992, Commission File No. 33-46483, and incorporated herein by reference). |
| | | |
| 4.1* | | Form of Indenture, between the Company and Harris Trust and Savings Bank, with respect to $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock (previously filed as Exhibit 4.4 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 under the Securities Act of 1933 filed with the Commission on January 26, 1993, Commission File No. 33-56184, and incorporated herein by reference). |
| | | |
| 4.2* | | Indenture between Carolina Freight Corporation and First Union National Bank, Trustee with respect to 6 1/4% Convertible Subordinated Debentures Due 2011 (previously filed as Exhibit 4-A to the Carolina Freight Corporation’s Registration Statement on Form S-3 filed with the Commission on April 11, 1986, Commission File No. 33-4742, and incorporated herein by reference). |
| | | |
| 10.1*# | | Stock Option Plan (previously filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1 under the Securities Act of 1933 filed with the Commission on March 17, 1992, Commission File No. 33-46483, and incorporated herein by reference). |
| | | |
| 10.2* | | First Amendment dated as of January 31, 1997 to the $346,971,321 Amended and Restated Credit Agreement dated as of February 21, 1996, among the Company as Borrower, Societe Generale as Managing Agent and Administrative Agent, NationsBank of Texas, N.A. as Documentation Agent and the Banks named herein as the Banks (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on February 27, 1997, Commission File No. 0-19969, and incorporated herein by reference). |
| | | |
| 10.3* | | First Amendment dated as of January 31, 1997, to the $30,000,000 Credit Agreement dated as of February 21, 1996, among the Company as Borrower, Societe Generale as Agent, and the Banks named herein as the Banks (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on February 27, 1997, Commission File No. 0-19969, and incorporated herein by reference). |
| | | |
| 10.4*# | | Arkansas Best Corporation Performance Award Unit Program effective January 1, 1996 (previously filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, Commission File No. 0-19969, and incorporated herein by reference). |
| | | |
| 10.5* | | Second Amendment, dated July 15, 1997, to the $346,971,312 Amended and Restated Credit Agreement among the Company as Borrower, Societe Generale as Managing Agent and Administrative Agent, NationsBank of Texas, N.A., as Documentation Agent, and the Banks named herein as the Banks (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on August 1, 1997, Commission File No. 0-19969, and incorporated herein by reference). |
17
FORM 10-K — ITEM 15(a)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
(Continued)
| | | |
| Exhibit | | |
| No. | | |
| | | |
| 10.6* | | Interest rate swap Agreement effective April 1, 1998 on a notional amount of $110,000,000 with Societe Generale (previously filed as Exhibit 10.1 to the Company’s Form 10-Q filed with the Commission on May 13, 1998, Commission File No. 0-19969, and incorporated herein by reference). |
| | | |
| 10.7* | | $250,000,000 Credit Agreement dated as of June 12, 1998 with Societe Generale as Administrative Agent and Bank of America National Trust Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents (previously filed as Exhibit 10.2 to the Company’s Form 10-Q filed with the Commission on August 6, 1998, Commission File No. 0-19969, and incorporated herein by reference). |
| | | |
| 10.8*# | | The Company’s Supplemental Benefit Plan (previously filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed with the Commission on December 22, 1999, Commission File No. 333-93381, and incorporated herein by reference). |
| | | |
| 10.9* | | The Company’s National Master Freight Agreement covering over-the-road and local cartage employees of private, common, contract and local cartage carriers for the period of April 1, 1998 through March 31, 2003. |
| | | |
| 10.10* | | First amendment dated as of February 12, 1999, to the $250,000,000 Credit Agreement dated as of June 12, 1998, among the Company as Borrower; Societe Generale, Southwest Agency, as Administrative Agent; and Bank of America National Trust and Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents. |
| | | |
| 10.11* | | Amendment dated March 15, 1999, to Amendment No. 1 dated as of February 12, 1999, to the $250,000,000 Credit Agreement dated as of June 12, 1998, among the Company as Borrower; Societe Generale, Southwest Agency, as Administrative Agent; and Bank of America National Trust and Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents. |
| | | |
| 10.12* | | Second amendment dated as of August 2, 2000, to the $250,000,000 Credit Agreement dated as of June 12, 1998, among the Company as Borrower; Wells Fargo Bank (Texas), N.A., as Administrative Agent; and Bank of America National Trust and Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents, as amended by Amendment No. 1 and Consent and Waiver dated as of February 12, 1999 and Amendment to Amendment No. 1 and Consent and Waiver dated as of March 15, 1999. |
| | | |
| 10.13* | | Third amendment dated as of September 30, 2000, to the $250,000,000 Credit Agreement dated as of June 12, 1998, among the Company as Borrower; Wells Fargo Bank (Texas), N.A., as Administrative Agent; and Bank of America National Trust and Savings Association and Wells Fargo Bank (Texas), N.A., as Co-Documentation Agents, as amended by Amendment No. 1 and Consent and Waiver dated as of February 12, 1999, Amendment to Amendment No. 1 and Consent and Waiver dated as of March 15, 1999, and Amendment No. 2 dated as of August 2, 2000 (as amended, the “Credit Agreement”). |
18
FORM 10-K — ITEM 15(a)
EXHIBIT INDEX
ARKANSAS BEST CORPORATION
(Continued)
| | | |
| Exhibit | | |
| No. | | |
| | | |
| 10.14* | | Agreement dated September 13, 2000, by and among The Goodyear Tire & Rubber Company and Treadco, Inc., a wholly owned subsidiary of Arkansas Best Corporation. |
| | | |
| 10.15* | | Stock Purchase Agreement by and between Arkansas Best Corporation and Estes Express Lines dated as of August 1, 2001. |
| | | |
| 10.16*# | | Letter re: Proposal to adopt the Company’s 2002 Stock Option Plan. |
| | | |
| 10.17* | | Amended and Restated Bylaws of the Company dated as of February 17, 2003. |
| | | |
| 10.18* | | $225 million Credit Agreement dated as of May 15, 2002 with Wells Fargo Bank Texas, National Association as Administrative Agent and Lead Arranger, and Fleet National Bank and SunTrust Bank as Co-Syndication Agents, and Wachovia Bank, National Association as Documentation Agent (previously filed as Exhibit 10.1 to the Company’s Current Report on 8-K, filed with the Commission on May 17, 2002, Commission File No. 0-19969 and incorporated herein by reference). |
| | | |
| 10.19* | | $225 million Amended and Restated Credit Agreement dated as of September 26, 2003 among Wells Fargo Bank, National Association as Administrative Agent and Lead Arranger, and Fleet National Bank and SunTrust Bank as Co-Syndication Agents, and Wachovia Bank, National Association and The Bank of Tokyo-Mitsubishi, LTD. as Co-Documentation Agents (previously filed as Exhibit 10.1 to the Company’s Current Report on 8-K, filed with the Commission on September 30, 2003, Commission File No. 0-19969 and incorporated herein by reference). |
| | | |
| 10.20* | | National Master Freight Agreement covering over-the-road and local cartage employees of private, common, contract and local cartage carriers for the period of April 1, 2003 through March 31, 2008. |
| | | |
| 10.21 | | Indemnification Agreement, by and between Arkansas Best Corporation and the Company’s Board of Directors. |
| | | |
| 13 | | 2004 Annual Report to Stockholders |
| | | |
| 21 | | List of Subsidiary Corporations |
| | | |
| 23 | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
| | | |
| 31.1 | | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 31.2 | | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 32 | | Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| * | Previously filed with the Securities and Exchange Commission and incorporated herein by reference. |
| # | Designates a compensation plan for Directors or Executive Officers. |
19
